Tuesday, May 23, 2017

Impact of GST - property prices may drop by up to 5 percent

"After the implementation of GST - property prices are going to go up - so better book today" - for a while, many builders in Pune were using GST - Goods & Service Tax - as a threat to frighten the flat buyers and force them to book flats. If you are one of them - you must read this news story published on May 23, 2017 in Times of India


Impact of GST - property prices may drop by up to 5 percent

Housing price are likely to fall by up to 5% following the implementation of goods and services tax (GST) after the Centre and states decided to peg the levy at 12% on finished houses or apartments.

After allowing for credit for taxes paid on inputs such as cement, steel, paints and other items, the actual burden will be lower. As a result, the price of a Rs 1-crore apartment may come down by Rs 3-5 lakh, said a consultant.

The net price of houses in the affordable segment, which cost up to Rs 30 lakh (at Rs 3,500 per sqft of built-up area) should fall by 5%.

Once GST kicks in, home buyers will not have to pay the 4.5% service tax on the final price that they shell out while taking possession.

As a result, tax consultants and realtors said that fixing the GST rate at 12% was a customer-friendly move and would lead to either lower tax liability or be tax neutral.

Read more at - GST gains: Prices of flats may drop by up to 5%

Related Stories:


1) Maharashtra legislature passes state GST Bill

2) Will MahaRERA resolve flat buyers' complaints against builders in 60 days?

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5 comments:

  1. One thing is lot of transparency will kick in post GST which will make it difficult to hide tax liability or manipulate invoices.
    It's not just GST, but several other factors which will ensure that property prices fall even further. Some of the major ones are listed below -

    Housing projects see fall in private equity investments in 2 consecutive quarters -

    http://economictimes.indiatimes.com/wealth/real-estate/housing-projects-see-fall-in-private-equity-investments-in-2-consecutive-quarters/articleshow/58467177.cms


    Why retail investors unlikely to earn great returns from real estate now -

    Basically, to put things in investment terms, your acquisition price is at a high multiple of a value that will supposedly be attained in the far future. This future value is whatever the developer is trying to push.

    Basically, to put things in investment terms, your acquisition price is at a high multiple of a value that will supposedly be attained in the far future. This future value is whatever the developer is trying to push.

    Much worse. Therefore, it’s only logical that savers should buy only one house, the one in which they are going to live. If your lifestyle and family require many houses, then that’s fine, but don’t make the mistake of considering it to be a financial investment.

    http://economictimes.indiatimes.com/wealth/real-estate/where-do-real-estate-profits-come-from/articleshow/58429999.cms


    And this one is very important factor for IT driven realty markets like Pune, Bangalore -

    Indian IT firms to layoff up to 2 lakh engineers annually for next 3 years -

    Executive search firm Head Hunters India on Sunday said the job cuts in Information technology (IT) sector will be between 1.75 lakh and 2 lakh annually for next three years due to under-preparedness in adapting to newer technologies.

    “Contrary to media reports of 56,000 IT professionals to lose jobs this year, the actual job cuts will be between 1.75 lakh and 2 lakh per year in next three years, due to under- preparedness in adapting to newer technologies.

    McKinsey and Co. report had said nearly half of the workforce in the IT services firms will be “irrelevant” over the next 3-4 years. Because of the changing technology, the most affected will be the professionals aged 35 and above, for it would be very difficult for them to get jobs.

    http://www.livemint.com/Industry/Y0oIb1D6N1ADZDfq3BUhUM/Indian-IT-firms-to-layoff-up-to-2-lakh-engineers-annually-f.html

    ReplyDelete
    Replies
    1. Real estate trend need 35-40% correction in prices so that buyers can stack up for purchase.

      There is something called construction depreciation factor. It is associated with quantum of depreciation of construction value over time. As times passes to clear existing inventory, this factor shall fuel further price fall.

      But builders are acting greedy hence don't let prices fall irrespective of huge pile of inventory. As per demand-supply, prices are on of verge of falling further, provided buyers don;t fall pray to builders' marketing gimmicks. People needs to stay away from instant gratification of owning property for social purposes.

      Delete
    2. "There is something called construction depreciation factor. It is associated with quantum of depreciation of construction value over time. As times passes to clear existing inventory, this factor shall fuel further price fall." - sounds logical, Mr. Unknown.

      Delete
  2. I-T job crash in India sends shivers down the spine of realty sector -

    The news of I-T jobs crashing in India is sending shivers down the spine of another industry -- real estate. Housing markets in cities which cater largely to the needs of India's young I-T workforce may not be able to bounce back, as they were once hoping to do -

    http://www.moneycontrol.com/news/business/real-estate/i-t-job-crash-in-india-sends-shivers-down-the-spine-of-realty-sector-2279901.html

    Above video in the article highlights 2 cities - Bangalore & Pune. In 40-80L bracket, of 39,000 flats available in Pune, only 3500 got sold. And we are not even counting the unsold flats lying with hoarders.
    Btw, resale prices at Blue Ridge, Hinjewadi is already down by over 27%. And this is just start of big, big real estate crash in Pune real estate market.

    ReplyDelete
    Replies
    1. Thanks for sharing Moneycontrol news, ThMonk. I have blogged it.

      Delete